This was a vote on the resolution or “rule” setting the terms for House consideration of legislation aimed at slowing foreclosures and reviving the housing market during the ongoing severe economic downturn. That legislation provided bankruptcy judges with the ability to modify mortgages on principal residences, allowed the Departments of Veterans Affairs and Agriculture and the Federal Housing Administration to guarantee and insure mortgage loans that are modified, extended protections against civil claims to companies servicing loans that engage in loan modifications, and made permanent what had been a temporary increase in FDIC deposit insurance.

The debate on the rule for the legislation focused more on the merits of the bill than on the rule itself. Rep. Castor (D-FL), a supporter of the legislation, said it “throws a lifeline to families . . . during this economic crisis . . . (and helps) ensure that if you work hard and you play by the rules, the tools and resources will be available to help you stay in your home.” After noting that “many in the banking industry do not like this bankruptcy provision that allows bankruptcy judges to modify home loans”, she claimed that bankers “brought this (legislation) on themselves to a great extent” by not being responsive to distressed homeowners.

Castor acknowledged that the legislation “won't help everyone”, but claimed that “it will (be) a prod, an incentive to these banks to refinance these loans. It's fair and equitable to allow home loan modifications because right now, in bankruptcy, every other (non-residential) asset can be worked out.” She added: “Many of these banks have received billions in taxpayer dollars. And I know that President Bush did not include a condition that these banks should refinance or sit down with folks and begin a discussion, but that must be a requirement now, or else foreclosures and the continued deterioration of all of our property values will continue.”

Rep. Hastings (D-FL), also speaking in support of the rule and the underlying bill, first acknowledged that he shared the concern of some who have criticized permitting mortgage loan modifications because they could cause “massive losses to financial institutions, increase the cost of borrowing for other homeowners or lead to a sudden surge of bankruptcy filings.” He then added that he thought these would not occur because bankruptcy judges will make their decisions based on whether a borrower had acted responsibly and whether the claim had merit.

Rep. Foxx (R-NC), who opposed the legislation, claimed that the Democratic majority “is bringing back the old welfare system” with this legislation. She said: “We don't have to ask people to work to draw welfare payments. No . . . Let's extend the payments . . . Let's put more people on welfare. That's exactly what this bill does . . . . “ She added that “the majority of the American people who are paying their mortgages, who are playing by the rules, who are going to work every day, and who are doing their jobs are getting sick and tired of the increase in the welfare system again.” Foxx claimed that the legislation will only excuse and help those people who did not do the right thing.

Foxx also expressed her concern that “while this bill claims not to be needing a lot more money eventually our (Democratic) colleagues . . . are going to come back asking for more money to deal with this issue.” She further argued against the rule itself because it limited the amendments that could be offered to change the legislation.

The vote on the rule was 224-198. All 224 “aye” votes were cast by Democrats. Twenty-six other Democrats joined with all one hundred and seventy-two Republicans present and voted “nay”. As a result the House was able to begin debating legislation aimed at slowing home foreclosures and reviving the housing market.